The worldâ€™s oldest bank is facing a very modern problem: almost $1 billion in derivatives losses which have only recently been discovered by management.

Monte dei Paschi di Siena (or Mountain of Piety of Siena, and MPS for short), founded in 1472 and Italyâ€™s third-largest lender, says it may lose a total of $956 million on three derivatives trades. The trades, put on between 2006 and 2009, were referred to as â€śAlexandriaâ€ť, â€śSantoriniâ€ť, and â€śNota Italiaâ€ť.

Reutersâ€™ Silvia Aloisi and Stephen Jewkes report that Alexandria was closed out in 2012, while the Santorini trade was liquidated in 2009. The Nota Italia trade was restructured and remains open. If you want to Â understand the Santorini deal, the place to go is this Bloomberg story, by Elisa Martinuzzi and Nick Dunbar; it seems to have started with a complex equity derivative, and snowballed from there.

MPS received a $2.5 billion bailout last June. Now it is likely to request an additional $5.2 billion in state-backed bonds next week to shore up its capital position.

The political fallout from the disclosure of the losses has been quick: the current head of the Italian banking association, a former MPS executive, has resigned. Italian prime minister Mario Monti is being sharply criticized — as is ECB chief Mario Draghi, who was responsible for regulating MPS at the time of the trades, Â as head of the Bank of Italy. The central bank says that it only found out about the existence of the trades â€śfollowing the discovery of documents kept hidden from the supervisory authority and brought to light by the new management of MPSâ€ť. MPSâ€™s board, for its part, says it didnâ€™t review or approve at least one of the three trades.

Regulatory and criminal investigations are now reportedly underway. Thatâ€™s helpful, because thereâ€™s still a lot we donâ€™t know about a story that already reads like a fevered collaboration between Dan Brown, Matt Taibbi, and Larry Summers. — Ben Walsh